Refining Community Logo

RE: "Scrambling to get position for Gasoline Season"

Home Forums Refining Community Refinery News "Scrambling to get position for Gasoline Season" RE: "Scrambling to get position for Gasoline Season"

#7433

Charles Randall
Participant

The refinery laggards are scrambling to get in position as they startup or go into shutdowns and few have fires (like El Segundo) all of which take capacity offline that will likely not be made up until the end of the season. Both US and Japan took a large number of refineries into turnarounds prior to the gasoline season trying to avoid having units offline during the peak periods of demand since inventories were full at the end of winter season for crude & gasoline. These 3 news items point out a growing problem.
 
The Valero/Lima coking refinery (now up for sale) is 120 years old, and non-coking refinery Calmet will be celebrating its 85th Birthday in 2008) which will be welcome relief to have fireworks about something positive instead of series of fires. The very youngest refinery in the US, Marathon / Garyville) should turn +33 in 2008. Global refining is only slightly better.
And therein lies some of the answer for high gasoline prices the pundits are laying bets on now. The US (and Global for that matter) Refining has less than 3% spare capacity most of the time because it must operate at 95-97% capacity year around to meet demand with less (~132 in 2006) refineries and over 218 US refineries shutdown due environmental &/or economic reasons). And so any large refinery downtime/accident sends spikes into the market. Start-ups and shutdowns are the most dangerous periods in a refinery operation and the most likely time to have a fire or accident despite the most stringent safety program & extensive planning and much worse for the other end of the scale.
 
The next several years 2006-2012 is going to put US & Global refineries at far end of that shutdown/startup program as over 500 projects go into play to expand capacity & environmental improvements of existing refineries: 185 projects on capacity – including 59 new cokers, and 145 Low Sulfur fuels & clean air environmental projects doing what they can to catch up with increasing demand under more stringent rules. The capacity projects do include 66 new grassroots refineries (only one or two down as attempts in US) but it remains to be seen if they can be put into anywhere but the “exempted” developing countries where environmentalist don’t put up the same level roadblocks (NIMBY’s at thier best) & government owned refining doesn’t worship as heavily at the environmental alters.
 
Couple that with Environmentalist not letting a new US refinery get into the construction phase since 1975, while existing refineries are moving into “old age” and you have a recipe for problems. Even though all these old-timer refineries have had whole sections modernized and units replaced, they are still operating way above design points for extended lengths of time.  When the US had 350- 320 refineries prior to mid 1980’s, the excess capacity was typically at 87%, leaving 13% spare capacity for peak gasoline season and plenty of slack to cover the staged shutdowns for maintenance. There was also no need for the level of imports (and big price adjusters) that are now required to supply the US with equivalent 10% of gasoline demand in the short spring/summer peak period when 60% of gasoline is consumed. And by default adding extra competition for crude oil from the gasoline exporting countries who had diesel economies that had cap on their production based on how much gasoline they could get rid of…..and you get a total lose-lose for the US markets.
 
But instead of going after the environmental groups / EPA (that follows their lead) as root cause, we will have the liberal media will just put this down as big oil conspiracy to take refineries down and boost prices or something else goofy.
 
The US Refining constraints for new plants, is the equivalent of entering one of your grandparents in a marathon and not letting them stop for water or rest periods.

Refining Community